Pound Sterling eyes more downside as BoE Mann favors more rate hikes

The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).

Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.

منبع: https://www.fxstreet.com/news/pound-sterling-faces-intense-sell-off-as-uk-factory-activities-continue-contracting-spell-202310030752

While investors think the Bank of England (BoE) is done hiking interest rates after it paused its policy-tightening spell last month to avert recession fears, policymaker Katherine Mann has a different verdict from her teammates. BoE Mann still favors more interest rate hikes and keeps them permanently higher as inflation shocks are likely to be more frequent.

Daily Digest Market Movers: Pound Sterling awaits Services PMI data

Technical Analysis: Pound Sterling turns choppy near 1.2070

In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.


  • Pound Sterling prints fresh six-month low after short-lived pullback as UK slowdown fears remain intact.
  • UK firms cut labor force on inventory backlog due to vulnerable demand.
  • BoE Mann supported further rate-tightening as more inflation shocks remain imminent.

When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.

The Pound Sterling (GBP) witnessed a sell-off on Monday after a pullback move and has extended the downside move on Tuesday as investors foresee a slowdown in the United Kingdom’s economy due to economic turmoil. The GBP/USD pair weakened after S&P Global reported the Manufacturing PMI contracted for the 14th time in a row in September as firms underutilized their capacity, cut inventories sharply, and trimmed their workforce amid a poor demand outlook.

The Pound Sterling faced an intense sell-off on Monday after slipping below Friday’s low of 1.2180 as it resulted in an activation of the Gravestone Doji candlestick pattern. The GBP/USD pair refreshed its six-month low near 1.2070 and is expected to continue the downside spree. Declining 20 and 50-day Exponential Moving Averages (EMAs) indicate that the short-term trend is bearish. Momentum oscillators continue to trade on a bearish trajectory.